Financial Institutions And The Energy Industry : Effects Of Oil Price On Banking Business

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Financial Institutions and the Energy Industry: Effects of Oil Price on Banking Business Caroline C. Counce University of New Orleans Abstract This paper discusses the recent downturn in the United States oil industry and how it has affected financial institutions involved in their financing and business decisions. While both local and national banks have contributed to its growth in the past, the revolution of new oil extraction techniques has led to the involvement of many additional firms looking to benefit from the boom. However, conditions in the global economy have led to oversupply and decreased demand causing prices to drastically fall leaving those in energy and production (E&P) and oil-servicing companies struggling to pay back large debts. Banks are now assessing the credit risk situation as analysts in the industry expect to see defaults occur the longer prices stay beneath profitable margins. Keywords: Energy & Production Financial Institutions and the Energy Industry: Effects of Oil Price on Banking Business While the US financial crisis hurt many in the overall economy, banks enjoyed the increase in business that accompanied the revolution in oil extraction technologies (Bonner, 2014). This is in particular true for North American banks at a time when overall borrowing of the economy has decreased over the past few years (Corkery & Eavis, 2015). However, recent events in the industry have led oil prices to plummet and

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